Everybody's got to live somewhere, and man, is the market in turmoil. It's Armstrong and Getty extra large.
Because four hours simply.
This is Armstrong and Getty extra large.
I've been looking forward to this conversation because I am actually Iril looking for a house.
Longtime friend of the Armstrong and Getty show, Steve Lemathy runs Elevate Realty Group in Northern California, and we thought we had talked to him about the topsy turvy real estate market and the recent court decision and to changees and commissions and that sort of thing. But Steve, how are you?
I'm doing great? How are you guys?
Is it just my observation as a guy looking for a house or is some things crazy right now?
Well? I'm they're pretty crazy.
I mean, I think that if you've been a home buyer in the market this year, you're probably scratching your head wondering, you know, what's going on? Why does it feel like the sky's falling? But the real estate market is so hot and so competitive.
Right, both things happening at the same time. Interest rates are sky high. Every house I look at, it's like a stream of people going through there, like they're I don't know, they're handing out prizes or something. It's crazy.
So what are the main factors at work why such an odd market these days?
The primary driver of that feeling of everyone is wanting to buy a home right now is just the severe lack of available inventory or the number of homes for sale. Right So, you know, in twenty twenty four, we're probably seeing about fifty percent fewer homes than we saw, you know in twenty twenty two.
Okay, wow, half easily half maybe more this year. Wow.
Honestly, So if you're going to buy eggs and you know you have half the number of eggs left, but the number of buyers is still the same, it's going to feel like there's a rush on eggs, right. So ultimately that that driver currently is us There are so many owners that have I think it's the status About seventy percent of owners have interest rates under three point six percent, So you know, that is locking down all the owners that would trade up or trade down or
make these lifestyle changes. That's just simply not happening. And you know, I think a lot of people had hopes this year that interest rates would come back downing going to happen.
Yeah, I've been.
Saying for a long time, and in fact, I think on our last conversation we talked about that, but there's just no evidence I would say that that's going to happen this year or even next year.
Right, Oh my god.
I was just going to ask, do you have any even rough guestimate how long it's going to take that situation to shake out? I mean, because if interest rates go down, it would be like till everybody who owns a house dies because they're not going to downsize for the same money.
Right, we could all retire to the Bahamas.
If I knew the answer to that question, you know, I would guess that, you know, my speculations, interest rates will never be in the threes again. Of course, there's some there's some calamity going on, and no one's going
to buy during that calamity anyway. So I think that when you know, if we look back to twenty nineteen, interest rates were five and a half percent at the end of twenty nineteen, and the Feds we're going to raise rates four times in twenty twenty, and then COVID happened, right, So if we look back to the past, we were headed to six six and a half percent anyway, and I think many people forget that, and so I would say interest rates at seven percent is actually probably where
they should be. So if rates come down, you know, another one percent down to five and a half to six percent, I think we'll start to see that problem really start to loosen up a bit. Like people's payments would go up. They would leave a three and a half percent mortgage for a five percent mortgage, but not seven and you know, the payments double or triple when when interest rates are seven percent, you have to be very motivated to want to leave that.
Yeah, so they have to sell, right, like.
They have to financially sell, or they're getting a job relocation. You know, there's a lot of reasons that people move outside of just I want a pool or I want a bigger house, right.
Right, right, Okay, So let's turn to the change in the way commissions are gonna work going forward. All No, nobody's sure exactly what's going on National Association Realtors with the settlement with the government that's going to shake up the whole. It's always five percent, always six percent, being.
Called the big world, being called the biggest change in real estate in many decades.
Yeah, what do you make of.
All of it, Steve, Well, this is just a proposed settlement. We'll start with that, right the judge, Do us approve all that? This is not a new case that's been fought like this has been waged for two or three years now, and many brokerages have settled. I think, in a nutshell, what I would recommend is the headlines are the headlines, and they're trying to create let's just call
it fear, anxiety or animosity. The fact of the matter is that, especially in California, commissions have always been negotiable. In my fourteen year career, honestly, interviewing with buyers and sellers, I don't think I've ever had a buyer or seller not ask me what the commission rate is and negotiate over that. Right, So you know, the proposed rule change just will require brokers to eliminate what is being offered in terms of commission on the mls. So it's just
a rule change. I think overall, the conversation of commissions should ultimately drive more negotiating power for people.
So I think.
Commissions will start to come down as they have for the last five or six years. I think it's just going to accelerate that conversation. So no drastic change, no drastic stavings.
For buyers or sellers.
I think it will just continue to be better for consumers and it will continue to drive I think, more professionalism and then better costs in the end for buyers and sellers.
More professionalism. That's interesting, Yeah, so fewer.
People who just stick listing up on MLS and hope.
I mean, if you look at the statistics, like eighty percent of the agents that are licensed today, there's one point six million of them will not be in business within twenty four months.
So if we eighty percent, you said.
Eighty percent, yeah, eighty percent will will be in and out within twenty four months. So that eighty percent, so a million agents are out there working with their friends and family typically right like three or four people a year will if the vast majority of the sales are being done with people who are not professionals or in the business or like, sit down and explain how commissions work.
It's no wonder that there's.
A giant settlement that's happening when you know the vast majority of people aren't treating this like a professional business, right, And so ultimately the people that I know, you know, the top thousand agents in the country, we've always sat down and presented how commissions work and the buyer and the seller chooses them. But that's not the standard for
all the agents in the marketplace. So I hope that you know, this will drive more professionalism and just the talk of this is going to create a reason for consumers to go out and interview multiple agents rather than just working with their friend, family or coworker who got their license a year ago.
Gotcha interesting, that's really interesting.
So, just out of curiosity, the easy Come easy Goo agents, do you have a derogatory nickname for them you'd like to share?
I would you call them fly by night agents?
Right?
You know, there's got to be some sort of seed dwelling bottom sort of something or other.
Yeah, you don't have to answer, right, Yeah, I'm just wondering entirely.
I gotta believe there's no he's a she's a there's a word, but you won't say it on the air.
And I understand why it's so bad that when I meet new people, I do not tell them that I'm a real estate sales person. I might say, like, I'm a real estate investor. Or, I own properties, but I don't go out and say, you know, I'm a real estatey.
We have the same thing in our profession with with the The exact same thing happens in our profession with disc jockeys, Like everybody was a disc jockey at some point, and so you don't want to say you're on the radio because they lump you in with all those fly by night disc jockeys.
Especially with all the podcasters nowadays and reel makers.
I would imagine, right, I.
Have a computer and a microphone. Yes, well this is this is interesting, Steve. I'm glad we reached out for your perspective. Anything else that's burning in your mind you wanted to share before we let you go, I would.
Just say, you know, at Elevate, we've been focused on providing a commission menu and options for nearly ten years, and it was for this very reason, right, we wanted to present all the options and let the customer choose their you know, their commission rate and their their service.
Right.
So you my recommendation to people out there who are who are interested in buying and selling, you should absolutely interview two or three agents, and that way you can see just how much value you're getting for whatever commission that they're ultimately charging you. And you should expect in command to know what am I getting by working with you. Yeah, this is not just a I'm open you know, the agents don't just open doors. And if that's it, then yes they are way way way overpaid.
I've had that kind Now I'll work with that person.
Thanks for opening the door for me. Here's fifty dollars or hover much money you get right, Yeah?
No, yeah, that's you know.
So I would highly highly recommend you got to interview multiple agents and then command from them, you know, show me what you're you know, show me what I'm getting for for whatever commission rate that's being set, both as a buyer and a seller. And I think that's very important moving forward.
Steve Lamoth, Elevate Realty Group, Steve, interesting stuff.
Thanks absolutely, thank you.
I meant to ask him if there's a handy mnemonic for remembering it's like lefty lucy righty tidy for wrenches? Is it by low sell high or buy high sell? I just never can remember which it is, and that's how I get myself into trouble.
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